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On Wednesday, Truist Securities adjusted its price target for BellRing Brands (NYSE: NYSE:BRBR), increasing it to $60 from the previous $50, while keeping a Hold rating on the stock. The adjustment followed a period of volatility for BellRing shares, influenced by the company's scanner data reports.
BellRing Brands experienced a 16% stock price drop following its second to third fiscal quarter earnings, as scanner data during the June quarter fell short of the company's fiscal year 2024 guidance. However, the trend reversed in the September quarter with scanner data indicating sales growth surpassing the management's fiscal year 2024 projections. Consequently, the stock has seen a 25% rise since the third fiscal quarter earnings report.
The company is anticipated to announce its fiscal year 2025 guidance during the November report of its fourth fiscal quarter 2024 results. Preliminary indications from management suggest that sales growth will be at the upper end of their long-term algorithm, which forecasts a 10-12% increase.
Truist Securities expressed surprise at the robust performance of BellRing's Premium Protein brand throughout the year. Despite nearing what was believed to be market maturity, with approximately 20% household penetration and 80% of products used as meal replacements for breakfast, the brand has sustained strong growth.
Looking ahead to fiscal year 2025, Truist Securities remains cautious about BellRing's prospects. Concerns were raised regarding the Premier Protein brand's potential to expand into new markets, such as single-serve products in convenience stores, and to appeal to new demographics, including males and younger women.
While acknowledging the possibility of the company achieving a 10-15% top-line growth with its base products, Truist Securities also noted worries about the stock's ability to maintain its valuation multiples if sales growth slows to 10%. The current multiples stand at 4.4 times fiscal year 2025 sales and 21.1 times fiscal year 2025 EBITDA.
In other recent news, BellRing Brands has been the focus of analysts at Citi who maintain a Buy rating for the company's stock. The firm's confidence stems from BellRing's sales growth outlook, projected to be at the higher end of its long-term algorithm of 10-12% by 2025. In addition, Citi analysts anticipate BellRing Brands to possibly exceed earnings per share expectations due to strong sales performance and a favorable cost environment.
BellRing Brands, known for its Premier Protein products, reported a robust third quarter for fiscal year 2024, with significant sales growth. This performance was largely driven by the Premier Protein brand, which saw a 20% increase in net sales and record household penetration. As a result, BellRing Brands has raised its full-year outlook, expecting sales and EBITDA to increase by 18-20% and 27-30%, respectively.
In other developments, BellRing Brands has repurchased 1.3 million shares for $74 million and retains a $216 million share repurchase authorization. Looking forward, the company anticipates robust sales growth into fiscal year 2025, while also expressing caution about the potential impact of inflation and increased marketing expenses. Expansion plans for 2026 are also being evaluated to further bolster the company's growth potential.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on BellRing Brands' financial position and market performance. The company's market capitalization stands at $8.51 billion, reflecting its significant presence in the protein and nutrition sector. BellRing's revenue for the last twelve months as of Q3 2024 reached $1.91 billion, with an impressive revenue growth of 21.58% over the same period.
InvestingPro Tips highlight that BellRing is trading near its 52-week high, with a strong return of 27.41% over the last three months. This aligns with the article's mention of the stock's 25% rise since the third fiscal quarter earnings report. Additionally, the company's profitability is emphasized, with InvestingPro noting that BellRing has been profitable over the last twelve months.
The P/E ratio (adjusted) of 35.18 indicates that investors are willing to pay a premium for BellRing's earnings, which could be attributed to the company's strong growth prospects mentioned in the article. However, an InvestingPro Tip suggests that the stock is trading at a high earnings multiple, which investors should consider in light of Truist Securities' concerns about maintaining valuation multiples if sales growth slows.
For readers interested in a more comprehensive analysis, InvestingPro offers 13 additional tips for BellRing Brands, providing a deeper understanding of the company's financial health and market position.
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